The Issue

America’s regional banks are traditional lending institutions that help local communities thrive and prosper. We have strong ties to the communities we serve and deliver economic development to regional economies. We welcome appropriate government regulation, based on risk and business model, to assure our safety and soundness.

Regional Banks Power Community Economic Growth

With deep ties to community leaders and employers, we use customer deposits to fund lending to local consumers and small- and medium-sized businesses. We have strong ties to the communities we serve and deliver economic development to regional economies. As a consequence of serving the heart of community economic growth, we welcome appropriate government regulation, based on risk and business model, to assure our safety and soundness.

The current one-size-fits-all regulations treat Wall Street banks the same as regional banks, despite large differences in their asset sizes and type business models. When the Dodd-Frank Act was enacted, it imposed significant systemic risk regulations on regional banks based on an arbitrary asset number of $50 billion, rather than taking into account a bank’s risk profile or business model. Since then, regulators at the Financial Stability Board and the Basel Committee for Bank Supervision have developed a more precise test to measure systemic risk by examining five factors: size, interconnectedness, complexity, global activity, and dominance in certain customer services, also known as substitutability.

Regulation Based on Risk

Regional banks stand for a tailored, balanced regulatory structure that acknowledges that risk is not measured by asset size alone, but instead accounts for the diversity and resilience of different banking sectors.

I would have to say also it’s not just size…I think it has to do with opacity, complexity, interconnectedness, and a variety of other things.

– Ben Bernanke, Former Federal Reserve Chairman

Instead of the current one-size-fits-all regulatory method, a more thoughtful, analytical approach would make for a safer and sounder financial system while freeing billions of capital for investment in good-paying American jobs. Congress needs to reexamine the definition of systemic in order to focus regulators on preventing a repetition of the 2008 financial crisis, and to assure that traditional regional banks are able to more efficiently help local communities grow their economies.